7 www.loubar.org August 2025 (Continued from previous page) Don’t roll the dice on your practice’s future. Sure, there is a chance you’ll never need us. But why take that chance? Lawyers Mutual is dedicated to Kentucky lawyers and makes your work our priority. Call (502) 568-6100 or visit LMICK.com for more information on how you can cover and protect your practice. We want you to focus on what matters. to a lawyer at the lawyer’s behest,” or (2) the accountant’s work was intended to aid in antici- pated litigation. Instead, the court reiterated that no accountant-client privilege applies under federal law and that to the extent that the Kovel Doctrine extends the attorney-client privilege or work product doctrine to accountants, such extension is necessarily narrow. Further, the defendant in the criminal tax evasion case filed a similar motion asserting privilege under the Kovel Doctrine, which was denied because confidentiality was not maintained when the forms were disseminated to the IRS. The defendant also waived privilege by asserting as a defense that the forms were incorrectly filled out by the accountant. Application of the Kovel Doctrine First, all the elements of the attorney-client privilege or work product doctrine must apply. Thus, if one of the exceptions to either is present (e.g., confidentiality is not maintained) then the Kovel Doctrine is inapplicable. Next, a court will generally analyze (1) whether the expert assisted in providing legal advice, (2) whether the expert interpreted complex subject matter for the attorney and (3) whether the attor- ney directed the actions of the expert. As with attor- ney-client privilege, any privilege extended by the Kovel Doctrine belongs to the client. United States v. Goldberger & Dubin, P.C., 935 F.2d 501, 504 (2d Cir. 1991). The burden is on the party asserting the privilege to show that the Kovel Doctrine ap- plies. See United States v. BDO Seidman, 337 F.3d 802, 811 (7th Cir. 2003). “A blanket refusal to tes- tify [or produce evidence] is unjustified;” instead the party asserting the privilege must establish the privilege “with respect to each question sought to be avoided.” United States v. Schmidt, 343 F. Supp. 444, 446 (M.D. Pa. 1972), supplemented, 360 F. Supp. 339 (M.D. Pa. 1973) ([ ] added). There is an exception to attorney-client privilege for communications made with respect to preparation of a tax return. See, e.g., United States v. Davis, 636 F.2d 1028, 1043 (5th Cir. 1981). However, some courts have recognized that privilege may apply to legal advice with respect to a tax position taken on a return or information contained in workpapers that is not intended to be disclosed. Id. at 1043, n.17; see also United States v. Baucus, 377 F. Supp. 468, 471 (D. Mont. 1974). Thus, if tax return preparation is conducted in connection with anticipated litigation, it is important to delineate between data entry and tax advice. The intention behind workpapers should be carefully documented. The Kovel Agreement While not required, many practitioners execute a Kovel Agreement to memorialize the relation- ship between the attorney and the expert. See Schmidt, 343 F. Supp. at 445. The agreement may serve as evidence of the expert’s relationship with the attorney, so that if necessary, the attorney can assert that any communications to which the expert is privy are privileged. Likewise, the agreement binds the expert to terms that support the extension of privilege. The scope of the Kovel Agreement should be clearly defined to demonstrate that the expert will assist in the rendering of legal advice. It should indicate that the expert will take the direction solely from the attorney. Additionally, there should be terms clarifying that the attorney owns all the expert’s analysis and workpapers in connection with the engagement. The expert should be restricted from breaching confidentiality or providing work product to third parties outside the permission of the attorney or pursuant to a court order. Finally, the expert should be paid by the attorney, although such payment is often contingent upon the receipt of funds from the client. Where the expert has already been engaged by the client for routine tax services, a separate Kovel Agreement can avoid involuntary waiver of privilege. Best Practices for Preservation of Privilege All potentially privileged documents should be segregated. Proper la- belling and Bates-stamping can mitigate problems with proof that arise through the co-mingling of privileged and non-privileged documents. Any communications between the expert and the client should include the attorney. Maintaining these best practices supports the extension of privilege to an expert under the Kovel Doctrine. Helen V. Cooper is a Partner in Dentons’ U.S. Tax group. Her practice focuses on tax controversy and litigation. Before joining Dentons, Helen worked at a Big Four accounting firm, serving on engagement teams that assisted taxpayers with accounting methods planning, the research and development credit, and tax controversy. She is also a Certified Public Accountant. Lucy McAfee is a member of Dentons’ Tax group, where she assists with tax plan- ning, tax controversy matters, state and local taxation and more. She is also a member of the Corporate group, where she assists with business formation and development, regulatory issues and due diligence. n William F. McMurry is Board Certified as a Legal Malpractice Trial Specialists by the American Board of Professional Liability Attorneys (ABPLA.org). The ABPLA is accredited by the ABA to certify specialist in the field of Legal Malpractice – SCR 3.130(7.40). William F. McMurry will personally handle each case while some services may be provided by others. Email [email protected] Call 502-326-9000 Talk to us about LEGAL MALPRACTICE And learn why lawyers throughout Kentucky refer their legal malpractice cases to William F. McMurry & Associates, PLLC Building referral relationships based on confidence and trust. “ First, all the elements of the attorney-client privilege or work product doctrine must apply. Thus, if one of the exceptions to either is present (e.g., confidentiality is not maintained) then the Kovel Doctrine is inapplicable.
